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How to Save for a Down Payment

Save for a Down Payment
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Save for a Down Payment

Save for a Down Payment

How to Save for a Down Payment

Purchasing a new home can be a long journey. Many steps lead toward getting the perfect mortgage for the perfect home. One of the most important steps is deciding how much you should save for a down payment on the mortgage. Also, this step can take the longest time.

Speaking to a mortgage broker or a realtor will help knowing how much to save for a mortgage down payment. The answer will have many variables including your credit score. The lower your credit score, the higher the money down will be on a home mortgage.

Why Save for a Mortgage Down Payment

There are many reasons having a down payment will help you with a mortgage. Many lending companies offer better loan terms and lower payments with a larger down payment. Much like purchasing a car with a large down payment, putting the most money down on a home mortgage is the best idea.

Taking the time to save for a large down payment is worth it. The housing market will always be a buyer’s market. There will always be homes for sale. Many will finance with an affordable mortgage with or without money down.

It can be difficult to know how much to save. The general rule of realty is a 20% down payment will lower mortgage payments. If the total purchase price of a home is $100,000.00, a good down payment would be $20,000.00. This brings the total amount to be financed at $80,000.00. This allows the lender to offer loans with better terms and a lower monthly payment. Of course, you can save up more, but the 20% rule is a good starting point.

Not only can a down payment lower monthly payments, it can save up to 10% of your total financing. There are many more opportunities to benefit from answering the question “how much should I save for a down payment?”

Putting a down payment on a mortgage will also eliminate the Primary Mortgage Insurance (PMI). PMI is insurance that the lender charges to insure a high-risk loan. The monthly fee for PMI can be large. Avoid the higher payment with a down payment.

How to Save for a Down Payment

How you save is up to you. There are many ways to save money when it is necessary. Simply putting money back every time you get a paycheck will help. Putting that money into an interest earning account will help it grow as well.

Use the 20% rule when saving if you can. Save 20% of your income every month. If your income is $2000.00 per month, try to save $400.00 of that for a down payment on your dream home.

Cut corners at the grocery store, eliminate television service and save every penny you can to purchase your new home.

AUTHOR

Matt Demorest, President

Matt is the President and Founder of HomeSure Lending. He has extensive experience working in mortgage, finance, business development, business operations and non-profits. Matt holds a Masters Degree in Youth Ministry Leadership. NMLS #1011726

All stories by: Matt Demorest, President

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